Borat is no barometer of the nation’s health

Monday 27 October 2008 12:29 BST

Sky News is on. The presenter is standing in front of a FTSE 100 chart heading downwards. Up flashes a list of the day's five biggest fallers so far: Xstrata, Rio Tinto, Antofagasta, Kazakhmys and Fresnillo.

Xstrata is Anglo-Swiss, Rio Tinto is mostly Australian, Antofagasta is Chilean, Kazakhmys is from the land of Borat and Fresnillo is Mexican. All in commodities, all heavily dependent on Chinese demand for metals and minerals, all with virtually no interests in this country.

Yet we treat the FTSE 100 index as though it's a bellwether of our economy. It's the same on the High Street. In any main shopping thoroughfare in the UK there will be just two retailers in the FTSE 100: Marks & Spencer and Next. There might be an Argos, part of Home Retail Group. But stalwarts such as Currys and Dixons (now DSG International) and Woolworths, have long gone.

In the FTSE 100, there are banks and mobile phone suppliers, of course, but, call me old-fashioned, I struggle to regard them as retailing. But time and again, the TV news treats us to a report on the FTSE 100 against a backdrop of shoppers laden with carrier bags from shops that are not in the index. The two bear no relation to each other.

Neither does the FTSE 100 have any connection with the condition of the UK economy. Drive around the country and you will be hard pressed to find companies that make up the elite Stock Exchange group. Most people do not work for firms in the top 100 and have no connection with them. Even those that continue to be major employers, like the banks, do not derive their main revenues from the UK. Just 10% of the earnings of our biggest bank, HSBC, for instance, originates here.

There are plenty of companies in the FTSE 100 with the word British as their original prefix, but British American Tobacco, British Gas, British Petroleum and British Telecom could lose their domestic sales tomorrow and it's doubtful their share prices would even flicker; the bulk of their activities and markets reside overseas. One of the latest arrivals in the FTSE 100 is the Eurasian National Resources Corporation, or ENRC, as its image-makers would prefer it to be called. It has a staff of 62,000, of which fewer than 50 work in the UK. However, the likelihood is that your pension and mine is invested in the shares of this exotic-sounding business (don't you just wonder what its board meetings must be like?)

Alot of funds track the index so they must hold a bit of every one of the 100. The idea, though, that the Eurasian National Resources Corporation, which is actually another Kazakhstan miner, can provide any clue as to the economic health of the UK is ludicrous.

In any typical British conurbation, the largest single employers are likely to be the town hall and the National Health Service. Throw in the out-of-town superstore and that is probably your lot. We don't make much on a substantial scale any more. There are no longer thousands of workers pouring through factory gates; we closed our major manufacturing plants years ago. Again, look down the FTSE 100 and there are just a few companies with decent-sized UK plants left: BAe Systems, Smiths, Rolls-Royce and that is about it.There's nothing wrong with the FTSE 100 becoming more international. As a barometer of the global economy and how the City has reaped the benefit by making huge fees out of the companies flocking here, it's fine.

What it is not, though, is in any way an indicator of how the underlying UK economy is performing. When the index plunges, we should despair for our pensions but not immediately and necessarily for the health of UK Plc. If we're not careful, we're in great danger of talking ourselves into deeper recession on the back of a gauge that does not reflect what is occurring here.

For that reason too, I have a suspicion that this downturn may not be as long or as deep as all that. We've been getting along quite nicely, thank you, with or without the FTSE 100 for some time now. Or to put it another way: the patient may be poorly but not as feverish as the thermometer suggests.

Why my vote's for state funding of political parties

Whenever a big political row breaks, there are spin-offs. Everyone, it seems, wants to climb aboard the bandwagon and score points. So it is with the Oleg Deripaska affair and the donation, sorry non-donation, to the Tories.

Taxpayers' money may now be spent investigating a complaint that the banker, Robin Saunders, gave £6600 to the Conservative party. Her personal cheque was returned because she's American — and a foreign national, same as Deripaska, is not permitted to donate to a UK political party.

The payment was re-sent, this time on the chequebook of her British investment company. Labour and the Lib-Dems are jumping up and down because this is precisely the route being mooted for Deripaska's cash.

The whole thing is pathetic. Saunders, unlike Deripaska, lives in Britain full-time, and has done since 1991. Her children go to school here. She pays UK taxes. Her office and main businesses are here. She helped with the funding of Wembley Stadium. She's involved with UK charities. The money was for a table at the Tories' Black and White Ball.

But, I hear you shout, rules are rules. She's not British. It's of no relevance whether the donation was notes stuffed into a brown envelope or payment for a black-tie do. Neither does it matter whether she gave £6600, or £50,000 as was being contemplated of Deripaska.

I agree. All it does is highlight the absurdity of the rules. Please God, can we adopt state funding of political parties? Even with our shot-to-pieces public finances, the money should be found. Just think what it would save in wild goose chases and hot air.

The PRs who shouldn't be so public

Studying the diagrams that have appeared linking the main players in the Oleg Deripaska saga, it's notable how some of them are business PRs.

Once, it would have been the faces of accountants, bankers, financial advisers or lawyers in the webs of intrigue. But while the PRs' presence indicates the ascendancy of the message and the importance attached to spin, I'm not sure if it's much for them to boast about.The art of the very best public relations is to remain quietly in the background, to not come between the client and the spotlight. When the PR adviser becomes part of the story, that has to be very dangerous indeed.

Far from illustrating their significance and just what a vital role they play, shouldn't they be asking themselves if this is how they want to be forever associated? Many of their clients tend to be conservative in nature, who make a point in their business lives of running a mile from politics. Usually, they want nothing to do with it; worse, they have a healthy disdain for politicians, who they charge with only getting in the way and making their lives more difficult. The last thing they want is to be known as the company "that employs so and so who is the adviser to so and so and was involved in the exposure of such and such".

It might look clever to be so well connected politically and socially but I'm not sure how wise it is for business. Far better, surely, to be a ghost at the table than to be there in person.

The rich can make us lose our marbles

In the same week that we were treated to accounts of politicians and the super-rich holidaying in Corfu, an article appeared on the fashion pages detailing how it's possible to hire all the accoutrements of a multi-millionaire — to look thepart for nothing.

Something happens to intelligent people when they're confronted by serious wealth. Their usual mental checks seem no longer to apply. Instead, they're blinded by what they see in front of them. Worse, they're impressed.

It doesn't always happen. I met someone last week who told me with disbelief how he'd been treated to Château Petrus in a bank boardroom when he knew that the bank was in trouble.

Likewise, I once had an argument with a supporter of a well-known, controversial figure. I questioned whether the person, who was purporting to be incredibly wealthy, was really that rich. "Of course he is," said the man I was talking to. "I've been to his apartment in Mayfair and I can tell you, when you get out of the lift, it's real marble."

I looked at him. He was serious. No matter that the flat may not have belonged to the supposed tycoon or if it was his, he'd bought the place using borrowed money.

They also forget how the rich get rich. Once, I interviewed a high-profile retailer. He asked if I'd got children. I replied that we'd just had a baby. His minion was instantly despatched to "get a present for the baby".

He gave me a teddy bear and a coffee table book about one of his businesses. When the piece was published, it wasn't to his satisfaction. A letter was sent to my boss, saying how disappointed he was, especially as I had left "bearing gifts". I had to explain that far from receiving a store card, the gifts were a teddy bear, which was sitting in an infant's cot at home, and a book that was on my desk.

He told me to return the book. The child is no longer a baby but we still have the bear. I'm thinking of giving it a new name: Peter or George.